Casinos gamble on a change in the law

The Government, keen to capitalise further on the financial benefits of gambling, is now updating gaming laws to make it possible for companies to locate an online casino operation in the UK. With that in mind, casinos are marketing themselves vigorously at UK punters – hoping to build share now in anticipation of securing a local licence.

Companies seeking a piece of the action are a mix of the old and the new. Established brands such as William Hill, Victor Chandler, Rank, Ladbrokes and Littlewoods, for example, have used their traditional strength in the sector to diversify their offer.

William Hill has an internet sportsbook (which offers bets on both sport and entertainment), an online casino with 70 games and a fast-growing poker site, says customer communications manager Mark O’Donnell. Also coming up is William Hill TV – a sports content and iTV gambling site available on Sky Channel 425 from October.

According to O’Donnell, the sportsbook has 500,000 registered accounts (135,000 active users) while casino/poker has 240,000 registered users, of which 50,000 are active.

Of course, this sector of the online business is as open to new entrants as any other. In the same way that Amazon, Ebay, Google and Friends Reunited redefined web usage, UK betting sites are attracting a new range of consumers to the net.

And it has proved a success story for smaller brands, which have found their niche and stuck with it. Betfair stole a march on big brands with a simple but ingenious mechanic that allows punters to bet directly against each other rather than taking fixed odds from bookmakers in their shops and on websites.

This model generates odds that are 20% better than those offered by conventional bookmakers. The result is that Betfair now ranks alongside Ladbrokes and William Hill in terms of trading volume. Currently, 200,000 registered customers match 500,000 bets a day – at a peak rate of 12,000 a minute.

If anything, the casino market is even more active – with new brands seeking to secure a share of the gambler’s wallet. According to Hitwise, a research company that monitors the online habits of about eight million UK internet users, two non-traditional casinos muscled their way into the top 10 most visited sites during June alongside the likes of William Hill, Ladbrokes and Racing Post.

One of these, Casino Palazzo, is owned and operated by Global Gaming Entertainment, a company operating under licence from Netherlands Antilles. The other, 888 Casino on Net, is based in Antigua, but is a regular advertiser on platforms such as SkyDigital.

Fast-growing market

Although it is hard to obtain reliable data on the size of the online gambling market, the broad picture is one of rapid growth. A recent Government survey reckons that 71% of Brits have gambled over the past 12 months.

While the number of people playing the lottery, football pools and fruit machines has been falling since 1999, the number playing bingo, betting at a bookmaker on non-racing events or playing internet casinos has risen.

This growth in online use is backed by analysts at Forrester, who say 7% of online users have had a flutter on the net.

O’Donnell confirms the trend. “As more people come online, awareness of gambling is growing and stimulating yet more demand.

The beauty of online is no queues and the transaction/payout is almost immediate.

Online marketing also allows us to appeal to customers in a timely and targeted way.”

In theory, the legalisation of UK-based casinos will boost interest further, says a spokesman at the Department for Culture, Media and Sport: “The UK is recognised as a well-regulated market. Casinos that are licensed and operated within the UK should give people more confidence to bet since they will be subject to closer legal control.”

But what about the types of people who frequent such sites? While everyone and their mother-in-law buys the occasional lottery ticket and backs a horse in the Grand National, who are the hardcore users? Are they the Andy Capp stereotypes that are still associated with high-street betting shops? No, says Tim Brown, managing director of online sales house 24/7 Real Media: “We did some work on behalf of a casino group and found two things. First, that online casinos appeal to the predominantly female bingoplaying audience as well as men. Second, that online gambling tends to be biased toward a younger, more upscale market. That’s partly to

do with the profile of the medium itself. But it’s also because most upmarket customers who want to place a bet don’t have time to visit a bookmakers.”

This view is confirmed by Betfair’s Matt Howe, who says his company’s customers are often genuine high-rollers. “A lot of customers coming to our site are people planning to make big bets but wanting to get the best possible margin. We’re talking about people who spend thousands at a time.”

O’Donnell also observes that online customers are younger and they come back to sites frequently. “Horse racing and football attract punters back regularly because they’re year-round activities. Poker players tend to spend the most time online – many playing tournaments for hours on end,” he says.

Advertising opportunities

All this activity seems to suggest that gambling could be fertile territory for marketers seeking to reach key demographics. But would punters on such sites be responsive to ads? Imagine settling down to play poker or roulette and having to beat away pop-ups.

Surely it would drive you back out of the casino door as fast as you came in? Not necessarily, says Brown. “It’s about understanding the mood of the customer and the environment they are in. A moving banner might be annoying. But a nice graphic of a bottle of Jack Daniels on screen could be unobtrusive and echo the kind of environment you might see in a real casino.”

Or you could insert relevant banners in the exit programme, he adds. Need a loan, flowers for the wife? “There are possibilities – assuming you advertise in a responsible way and the sites in question will listen to such proposals,” he says.

There’s the rub, because, as Howe points out, bookmakers and casino operators are pretty ill-disposed toward advertising. “Our main revenue stream comes directly from people playing games. So there’s no real sense in us diverting traffic away from our site or risking disaffecting our user base with ads.”

O’Donnell agrees: “William Hill doesn’t post ads for other companies on its website.

There is already strong demand for space on the site internally. It’s perfect for promoting William Hill products as the audience we want to reach are, in effect, self-selecting.”

This point of view extends to most forms of online marketing. Search engine guidelines, for example, make it impossible to target gambling traffic through sponsored links unless you are a gambling concern.

There’s also little mileage in data mining, says Howe. “Our clients aren’t the kind of people who want us to pass on their details for DM purposes. The service is all about making sure the customer feels well looked after.”

Is there any reason to believe this antipathy to advertising might change? One possibility is that the increasing number of mainstream media brands seeking links with the gaming sector will alter the dynamics.

For example, lads’ mag FHM has joined forces with Victor Chandler to launch an online casino and poker room on its website.

Alison Digges, head of sales and marketing at Victor Chandler Games Division, says the partnership achieves a range of goals. For Victor Chandler, it opens the door to a young, male audience. For FHM consumers there is the chance to play online games using stateofthe-art software in a branded environment they know and trust.

This shift toward gaming as a mainstream activity is also reflected in Virgin Group’s tie-in with WagerWorks to launch an online betting and casino business on Virgin.com.

Although the site will offer the usual games such as roulette, blackjack, bingo and poker, the man heading the venture, Simon Burridge, says Virgin will be a broad-based entertainment site with housewives a key target.

“Too much of this business is about money.

We see ourselves as an entertainment brand not a gambling brand. It’s about giving people an enjoyable time even if they lose,” he says.

This strategic emphasis sounds like good ground for a range of marketing tie-ins – even if some of the more obvious ones might stay within the Virgin Group. What odds, for example, on Virgin offering prize promotions such as flights to Vegas for winners of online poker tournaments? Sounds like a dead cert.

Online casinos: the rules

At present, the law does not allow online casinos to be located within the UK.

This has led to a boom in businesses based in the Caribbean and the Channel Islands – many run by established UK bookmaking and leisure brands or global gambling companies.

Assuming the new Gambling Bill is introduced to the House of Commons this autumn, the Department for Culture, Media and Sport reckons a new act could be in place by summer 2005.

At that point, online casinos will be able to operate in the UK under licence from a new body called the Gaming Commission – a move which should ensure a responsible approach.

Operators’ gaming software will have to be checked to ensure it is fair and there will be standards aimed at preventing access to the site by children (currently a newsworthy issue).

Licensed gaming sites will carry a kitemark assuring punters that certain standards have been met.